ROSELAND, NJ — US private-sector employment fell unexpectedly in September, according to the latest ADP National Employment Report, reinforcing signs of a slowing labor market even as economic growth remains robust.
Payroll processor ADP announced on Wednesday that private employers lost 32,000 positions in May. Economists had expected a gain of around 51,000. The August figure was also revised sharply lower, from an initially reported increase of 54,000 to a net loss of 3,000. The September fall was the steepest since March 2023.
“Despite the strong economic growth we saw in the second quarter, this month’s release further validates what we’ve been seeing in the labor market, that US employers have been cautious with hiring,” said Nela Richardson, ADP’s chief economist. She added that the recalibration of the data “remains consistent with a narrative of slowing in hiring momentum.”
The contraction occurs at a sensitive time, as the federal government shutdown stops the publication of official Bureau of Labor Statistics figures. This has increased the importance of ADP’s data, which economists and financial markets closely watch. The BLS report, usually released on Friday, has not been delayed since 2013.
The decline was broad-based. Service-providing industries lost 28,000 positions, led by a fall of 19,000 in leisure and hospitality, a sector often viewed as a bellwether for consumer spending. Professional and business services contracted by 13,000 jobs, other services by 16,000, and trade, transportation and utilities by 7,000. Construction shed 5,000, while manufacturing declined by 2,000. Education and health services provided a bright spot, adding 33,000 jobs, as the school year began and health care hiring continued to expand.
Smaller firms were hit hardest. Companies with fewer than 50 employees cut 40,000 jobs, while medium-sized businesses also experienced staff reductions. In contrast, larger employers, those with more than 500 workers, added 33,000 positions, highlighting the uneven burden of the slowdown.
Pay growth also showed signs of slowing down. Annual pay increases for those who stay in their jobs stayed steady at 4.5 percent, but those who switch jobs saw their pay rise more slowly to 6.6 percent, down from 7.1 percent in August.
The data adds to a series of reports indicating a cooling labor market. The unemployment rate rose to 4.3 percent in August, the highest since October 2021, while job openings increased only slightly, and both hiring and quit rates declined slightly. The country also lost 13,000 jobs in June, the first monthly decline since 2020, according to official statistics.
Susan Collins, president of the Federal Reserve Bank of Boston, said this week that her baseline forecast does not anticipate the labor market weakening much further. “But there are risks,” she cautioned. “In particular, I see some increased risk that labor demand may fall significantly short of supply, leading to a more meaningful and unwelcome increase in the unemployment rate.”
Markets are closely watching ahead of the Fed’s upcoming meeting on October 28-29. The ADP report has increased expectations that the central bank will cut its key borrowing rate by another quarter point, as policymakers balance strong GDP growth with rising signs of labor market weakness.
